Sep. 1, 2013

The Michigan state Capitol. / Jessica J. Trevino/Detroit Free Press

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Detroit Free Press Business Writer

As Michigan marks its first Labor Day as a right-to-work state, it’s clear the sweeping changes some predicted on both sides of the emotional debate haven’t happened yet.

Michigan became the 24th right-to-work state in March. The law makes it illegal to require financial support of a union as a condition of employment, which could hinder organized labor’s ability to fund organizing and political activities. To be specific the legislature passed and Gov. Rick Snyder passed two laws, one covering private-sector workers and the other applies to public employees.

But union members have not rushed to stop paying their dues, although membership has fallen.

Neither has Michigan transformed itself into Silicon Valley or the Bakken oil field of North Dakota where unemployment has fallen below 2% and average weekly wages have more than doubled over the last decade.

Michigan’s unemployment rate has dropped to 8.8% in July from 9.3% a year earlier. That’s well above the 7.4% August national rate and second highest below Illinois (9.2%) among the five Great Lakes states.

“You need 10 years before you can reasonably measure any impact of the adoption of right-to-work law in any state,” said Michael LaFaive, director of fiscal policy at the Mackinac Center for Public Policy, which supports the law. LaFaive co-authored a report released last week titled “Economic Growth and right-to-work Laws.”

The state’s top labor official agrees.

“I think it really is too soon to tell how workers are going to respond,” said Karla Swift, president of the Michigan AFL-CIO.

In most cases, collective bargaining agreements have not yet expired, so workers have not had an opportunity to opt out.

The controversial law passed during last December’s combative lame-duck legislative session and drew mass protests at the state Capitol led by organized labor. It remains a political and legal flash point.

The UAW last week said it will appeal an Aug. 15 state appeals court ruling that said state employees are covered by the law.

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The Michigan Economic Development Corp. is responsible for recruiting new businesses and helping existing employers, Michael Finney, CEO of the MEDC, declined to comment for this article. The MEDC also declined to provide examples of new companies that have moved to Michigan or current companies that expanded because of the new law.

In a statement, the MEDC said 50% of the largest business investments each year were made without considering Michigan before passage of the law.

“We received consistent feedback that Michigan and was just not a state considered by many site selection executives and consultants for major business expansions,” the statement said.

The only notable corporate relocation since passage of the law, however, was Pulte Homes’ decision in May to move its headquarters — and about 325 jobs — to Atlanta from Bloomfield Hills.

Charles Ballard, a Michigan State University economist, said the law could exert downward pressure on Michigan wages, but the degree of that pressure will be small.

That’s because Michigan has been a de facto right-to-work state for years, Ballard said, because of the lessening influence of unions and greater cooperation between management and labor in tight economic times.

“For better or worse, unions have lost strength for the last 50 years in the United States, and Michigan is no exception to that trend,” Ballard said.

Total union membership in Michigan has dropped from to 648,000 in 2012 from 947,000 in 2002, according to the federal government’s Bureau of Labor Statistics. That all happened without the right-to-work law in place.

Ballard calculated the per-capita income for all right-to-work states and non right-to-work states for 2011. Michigan and Indiana were not right-to-work states in 2011, but they are now.

“If we don’t include Michigan and Indiana, per-capita income was greater in the non-right-to-work states by about $5,400,” Ballard said. “If we include Michigan and Indiana as right-to-work states the income gap is more than $6,000.”

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The latest Mackinac Center study looked at the difference in economic growth of states with and without right-to-work legislation over three periods: 1947-70, 1971-90 and 1991-2011.

There was no significant effect in the first period. But from 1971 to 1990, LaFaive and co-author Michael Hicks asserted, right-to-work states’ average annual employment and real personal income grew about 0.9 percentage points than union-friendly states. Since 1991, that gap has been 0.7 percentage points.

Globalization, automation of manufacturing and Michigan’s college graduation rate have had more to do with trends in wages and job creation than this piece of legislation, said Ballard.

“Really, it is making a mountain out of a mole hill,” said Steven Palazzolo, a labor and employment attorney with Michigan law firm Warner Norcross and Judd. “With all of the brouhaha about how it (right-to-work) is going to have all of these terrible effects, we have not seen that at all.

“A lot of these companies they have pretty stable long-term work forces. Those people are not going to drop out of the union. The interesting thing will be what will new people do? Will those new people join the union or won’t they?”